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Traditionally, investment in Gold and Real Estate has provided the best hedges against inflation. As a matter of fact, those who swear by the land they own also point out the fact that real estate investments have historically withstood everything – from stock market crashes to economic meltdowns – and have provided a fair return on the investment, never failing to protect the believer from the forces that corrode his life’s savings.
“Bank interest rates are anything but encouraging. The stock markets are volatile and at best suited for those with a penchant for risk taking. Investment in Gold, after a certain stage, is unwieldy. Which leaves only the Real Estate sector as a preferred area to park your surplus and savings” says K.K.Kolothungan the Chairman & Managing Director of Kemia Apartments Limited, a construction company with a pan-India presence, and many successful projects under the belt.
“To be more specific, for the young upwardly mobile, newly married couples, investment in real estate should be the preferred choice as they can easily ride through the initial years of interest payments to end up owning their own homes – emerge as property owners – by the time they take up greater responsibilities and expand their families.” This is extremely sensible, considering the fact that young people tend to splurge on unnecessary short term luxuries only to rue about their financial health well after it becomes too late.
People engaged in the IT and ITES sectors, who start life with huge pay packets are the best examples of this, as their growth curves flatten out in the mid-term severely restricting their opportunities to invest. “You will be surprised to see the number of young people who are investing in properties these days” says Kolothungan, adding “I am always fascinated by their beaming faces when they become homeowners at a relatively early age, confident, contented and secure”. This route also provides one with the possibility of renting out the property which ensures rental income to offset the outgo in terms of EMI’s. “Thus, the actual outgo is, in fact, only marginal over the period of the loan payback after which one becomes the owner of the property, that too with just a minimum amount of financial sacrifice” continues Kolothungan. One could not agree more – only, I would have used the term financial prudence instead of financial sacrifice.
The real estate market in India is far from the heady days it is normally associated with. And despite everything that the construction company glossies would like us to believe, the industry is saddled with slow moving, even unsold stock. The economy is in the doldrums, industrial production is gasping for breath and the lack of demand is spreading a pall that is almost all pervasive. Just the kind of time to enter into the real estate market. “I for one think that the market has already seen the worst and is now ready to undertake it slow move northward” says Kolothungan. “With the first signs of movement, the latent demand in the market will also surface, as those who had postponed their acquisitions, unable to make up their minds about the market movements, will come forward and place the buy orders”. Naturally, this will have a cascading effect on the realty segment, pushing prices up, opine experts.
Speculative investment apart, the market is also according great opportunities for the regular nest makers to enter into the investment mode as most of the builders are offering attractive incentives to push products, apart from offering a number of extras as the icing on the cake. Says Kolothungan “take Kemia’s case for example. We are now offering the unique 10 + 10 home concept, which has evolved out of our long experience in the segment and based on innumerable customer feedbacks. This envisages a 10 year warranty, 10 years of maintenance, built-in high compliance standards and real value for money.”
While the top and the bottom ends of the market have always been relatively price inelastic , it is the middle segments that the most striking bargains (if one is permitted to use the term) are available and smart investors (read homebuyers) will do well to avail of them before the inevitable turnaround comes.
The piece was written for the Financial Express BFSI@Kolkata.
Nistha Sharma is a student in BESC, a leading city based institution and is a keen watcher of all matters economic. She has already completed a course in Corporate Communications from the institution and wants to pursue a career in the field. “I am fascinated by the way brands communicate – talk to the various stakeholders even as they go about refurbishing their salience” says Nistha. “Naturally, I want to see this process of communication unfolding in real time, be a part of the game as it were, a protagonist as opposed to being a mere spectator”. Nistha has plans to open her own startup in the field and has chosen the social media as her area of expertise.